Bank charges complaints pile up ahead of High Court battle

Banks have been allowed by the Financial Services Authority (FSA) to continue to put thousands of consumer complaints about bank charges on ice.

Under the City watchdog's rules, banks are supposed to deal with complaints promptly. However, with a case concerning the legitimacy of charges for unauthorised borrowing to be heard in the High Court in the new year, the FSA says it will allow banks to continue a temporary "waiver" on their handling of complaints.

Likewise, the Financial Ombudsman and some lower courts have stopped dealing with bank charges cases in anticipation of the outcome of the legal battle, in which leading banks will be pitched against the Office of Fair Trading.

"The test case is a crucial step in establishing certainty about the legality and fairness of unauthorised overdraft charges," said Clive Briault, managing director for retail markets at the FSA. "When this has been established, complaints can be dealt with consistently and fairly."

But banks will not get carte blanche to behave in any way they like in advance of the court case. The FSA said it would be examining how customers were treated during the waiver period. In particular, it pledged to keep a close watch on banks to ensure they don't make "materially adverse changes in the level of unauthorised overdraft charges".

In response, the consumer group Which? said the FSA needed to be more "proactive" in ensuring that banks did not introduce even harsher penalties and confusing charging structures before the High Court case starts.

"Since the test case was initiated in July, some banks have muddied the waters by amending their terms and conditions," said Which? spokesman Doug Taylor.

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